IN RE: Legacy Beavercreek of Dayton Operating Company (2026)

Chapter 7

Chapter 13

MEMORANDUM OPINION AND ORDER DETERMINING THAT THE AUTOMATIC STAY DOES NOT APPLY TO CERTAIN STATE COURT LITIGATION AGAINST NON-DEBTORS

I. Introduction

This matter comes to the Court in a somewhat unusual posture, and the resolution is somewhat heavy on discussion of the concurrent jurisdiction of state and federal courts, along with the Rooker-Feldman doctrine. But this Memorandum Opinion and Order also covers the Sixth Circuit case law on what is required to “extend” the provisions of the automatic stay that bar action “against the debtor,” 11 U.S.C. § 362(a)(1) and (6),¹ to non-debtor entities (namely, an injunction under § 105(a)), and when the “property of the estate” subsection of the automatic stay, § 362(a)(3), can apply to actions against non-debtors. The takeaways are that bankruptcy courts typically have the final say on applicability of the automatic stay, unobstructed by the Rooker-Feldman doctrine, and that examining whether the automatic stay applies to actions against non-debtor entities is fairly easy in the Sixth Circuit, at least when examining the “against the debtor” provisions (§ 362(a)(1) and (6)). The basic question is whether there is a § 105(a) injunction in place? If not, then those “against the debtor” provisions of the automatic stay do not apply to non-debtors. But when it comes to analyzing whether the “property of the estate” provision of the automatic stay (§ 362(a)(3)) applies to an action against non-debtors, the analysis can be more intensive and factually dependent.

In this situation, Creditors Healthcare Services Group and HCSG Labor Supply, Inc. (collectively, the “HCSG Companies”), who are seeking to proceed with litigation against entities that are not debtors in these related chapter 7 cases, but which are (or were) affiliated with the Debtors’ former management company turned liquidation administrator of the Debtors (and put them into this and the related chapter 7 cases), are asking for confirmation that the automatic stay does not apply to claims they brought in a state court in Pennsylvania, prior to these bankruptcies, as against non-debtor entities.² And the non-debtor entities being sued, who have not filed bankruptcy in this Court (or proofs of claim against the Debtors), but who currently have the benefit of an interlocutory state court order staying litigation against them due to the automatic stay in this and the related chapter 7 cases, naturally oppose. The non-debtors marshal a myriad of jurisdictional arguments to claim that the actions against them should remain stayed. But their arguments, once unpacked, are ultimately unavailing. Further, apart from the jurisdictional discussion, this was ultimately easier to resolve than was suggested by the parties’ briefing.

Taking things in reverse order of presentation in the briefs, the record of the related chapter 7 cases pending before this Court makes clear that no adversary proceedings have been filed. Thus, there is no possibility, at this time, of issuance of an injunction under 11 U.S.C. § 105(a) that could “extend” the automatic stay, which by its plain language, only applies to debtors that have pending bankruptcy cases. Moreover, the parties that have briefed these issues – all creditors (or potential creditors) of the debtors in these chapter 7 cases – likely do not have standing to request such an injunction, which is issued only in rare circumstances, typically when needed to assist with a debtor's chapter 11 reorganization, which will not happen in these chapter 7 cases.³ In addition, neither the debtors nor the appointed Chapter 7 Trustee has moved for an injunction – an “extension” of the automatic stay. And the appointed Chapter 7 Trustee (the “Trustee”) has not responded to the HCSG Companies’ pending motion. Accordingly, it can be presumed that the motion has little to do with the administration of the bankruptcy estates in this and the related chapter 7 cases.

As a result of the foregoing, the only remaining non-jurisdictional issue for the Court's consideration is the non-debtor respondents’ assertion that § 362(a)(3), which protects property of the estate, could be interpreted in such a way as to make the automatic stay applicable to them in this circumstance even though they are not debtors in the chapter 7 cases pending before this Court and they do not hold any funds or seek to recover any funds that are property of the estate. Based on the record currently before this Court, the Court cannot conclude that the automatic stay extends beyond the Debtors actually before this Court, or that property of the estate is impacted by the State Court Litigation.

II. Background

A. Chapter 7 Bankruptcies of Debtors

On August 5, 2025, Legacy Beavercreek of Dayton Operating Company, LLC and eighteen (18) related entities – a holding company, Buckeye Chai Holding Company, LLC,⁴ and seventeen (17) related operating companies whose nursing home assets were sold prepetition, as identified in the caption to this Memorandum Opinion and Order (collectively, the “Debtors”) – filed voluntary petitions in this Court to liquidate under chapter 7 of title 11 of the United States Code (the “Bankruptcy Code”).⁵ Notably, all of the Debtors listed DMD Management, Inc. (“DMD”) as their Liquidation Administrator, listed DMD's address in Cleveland, Ohio as the Debtor's address, and listed DMD as the entity who maintained the Debtors’ books and records before filing this case and the entity in control of the Debtors at the time of the filing of this case. See, e.g., Vol. Petition at 1 (Doc. 1 at 1, Case No. 25-31556); Statement of Fin. Affairs at 12, item 26a.1, 13, item 26c.1, 14, item 28.1 (Doc. 39 at 85, 86, 87).⁶

On September 4, 2025, this Court entered its Order Finding the Appointment of a Patient Care Ombudsman Unnecessary (Doc. 17) (Doc. 25) (the “Ombudsman Order”),⁷ without opposition by any party in interest,⁸ on the bases that these Debtors sold their assets and operations in December 2024 and “there are no further operations, patients, or healthcare records in the Debtor[s’] possession.” Ombudsman Order at 2. Since then, apart from the Debtors seeking more time to file their schedules and statements of financial affairs, creditors filing claims by the claims bar date of October 14, 2025, and the matter now before this Court, there has not been much substantive activity in these related chapter 7 cases.⁹

B. Motion to Determine Applicability of Automatic Stay

On November 3, 2025, the HCSG Companies filed the Motion to Determine Applicability of the Automatic Stay to Claims Against Non-Debtors and for Related Relief (Doc. 48) (the “Motion to Determine”), pursuant to 11 U.S.C. §§ 105 and 362, “for a determination as to the applicability of the automatic stay” in certain of the related chapter 7 Debtor's cases “to certain non-debtor entities.”¹⁰ (Doc. 48.) The genesis of the Motion to Determine filed by the HCSG Companies is apparently that the Non-Debtors, the Debtors’ co-defendants, refused to participate in depositions related to pending litigation in the Court of Common Pleas of Bucks County, Pennsylvania (the “State Court”), Case No. 2024-7954, Healthcare Services Group, Inc v. Broadview Nursing Home, Inc. (the “State Court Litigation”).¹¹ The Non-Debtors, who seek to maintain the benefit of the present stay by the State Court, have not filed an adversary proceeding in this Court to seek an injunction, but generally argue, amongst other things, that the State Court Litigation should remain stayed because of the Non-Debtors’ connection to the Debtors, through DMD, and because it would potentially implicate property of the bankruptcy estate, although such property may only actually, at most, be documents subject to discovery.

In support of the Motion to Determine, the HCSG Companies attached several filings from the State Court Litigation. See Ex. C, The Legacy Def.’s Answer, Apr. 14, 2025; Ex. D, Answer to Pls.’s Compl., Apr. 22, 2025; Ex. E, Docket, Case #2024-07954; Ex. F, Notice of Bankruptcy and Suggestion of Stay, Aug. 8, 2025. The HCSG Companies assert that they provided, through various service agreements, housekeeping and dining services for nursing homes in Ohio. See Ex. C to Obj. (Doc. 52-1), Attachment to Proof of Claim of DMD, Claim No. 21-1 in Case No. 25-31557. These agreements are alleged to have involved both the Debtors and the Non-Debtors. All these entities are apparently affiliated by current or former management (DMD) and are alleged to be jointly and severally liable for damages under a Master Labor Supply Agreement. See Ex. B to Mot. to Determine at 13, ¶ 8. The Debtors, except for Buckeye Chai,¹² and the Non-Debtors apparently have or had common officers. Mot. to Determine at 4, ¶ 16; 13, ¶ 55; and 15, ¶ 65. Moreover, it is clear that DMD has been involved with both the Debtors in this case, as Liquidation Administrator, and as manager of the Non-Debtors in the State Court Litigation;¹³ however, it is notable that according to the State Cour Litigation filings submitted, of which this Court takes judicial notice pursuant to Rule 201(c)(1) of the Federal Rules of Evidence (made applicable to this contest matter by Rule 9017 of the Federal Rules of Bankruptcy Procedure) with respect to the existence of the State Court Litigation, the parties thereto, and the types of claims asserted therein, DMD itself is not a named party to the State Court Litigation. See In re Thomas, No. 16-27850, 2019 Bankr. LEXIS 804, at *18 (Bankr. W.D. Tenn. Mar. 8, 2019) (citing United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (“noting that a court may take judicial notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue”)). Moreover, DMD is not one of the Debtors in the chapter 7 cases before this Court.

C. State Court Litigation

To back up in the chronology, prior to the filing of the Debtors’ chapter 7 cases, the HCSG Companies filed a five (5) count Complaint (the “Complaint”) for money judgment based on alleged breaches of a Master Housekeeping Service Agreement, Master Dining Service Agreement, Master Labor Supply Agreement (Dining), and Master Labor Supply Agreement (Housekeeping) in the State Court on December 18, 2024. See Ex. D to Obj. (Doc. 52-1) at 25-42 (signed under “the penalties of 18 Pa. C.S.A. § 4904 relating to unsworn falsification to authorities”) against ten (10) Non-Debtors and the eighteen (18) Debtors – all the “subsidiary” Debtors, but not Buckeye Chai. In response, the Debtors involved in the State Court Litigation filed The Legacy Defendants’ Answer with New Matter and Affirmative Defenses on April l4, 2025 (Ex. C to Mot. to Determine (Doc. 48-3)), through law firm Cozen O'Connor, and the Non-Debtors filed an Answer to Plaintiffs’ Complaint with New Matter and Counterclaims on April 22, 2025 (Ex. D to Mot. to Determine (Doc. 48-4)), through Fox Rothschild LLP (together, the “Answers”). It appears, as asserted in the Motion to Determine, and confirmed by at least the aforementioned Answers, if not also the docket for the State Court Litigation, that the Debtors and Non-Debtors are not pursuing any crossclaims against each other. See Docket, Case #2024-07954, Ex. E to Mot. to Determine (Doc. 48-5)). The Non-Debtors, however, were apparently pursuing counterclaims against the HCSG Companies, at least before the State Court Litigation was stayed. See Ex. D to Mot. to Determine, Answer to Pls.’ Compl. with New Matter and Countercl.

Following the filing of the Debtors’ bankruptcy petitions, the Debtors filed a Notice of Bankruptcy and Suggestion of Stay in the State Court on August 8, 2025. See Ex. F. to Mot. to Determine (Doc. 48-6). And, unsurprisingly, the HCSG Companies have filed proofs of claim in the Debtor's various Chapter 7 cases, alleging generally, without specific reference to the State Court Litigation, that DMD may be “entitled to a claim for reimbursement, contribution or indemnity from the Debtor.” See, e.g., Claim No. 17-1, Case No. 25-31552, Oct. 14, 2025 (claim of DMD for the asserted secured amount of $213,571.49 and unliquidated amounts). In addition, two former officers of the Debtors, James Taylor and Ben Kiss, both listing their notice address as c/o DMD Management, Inc., filed contingent and unliquidated proofs of claim for indemnification, but those officers are not parties to the State Court Litigation and have not responded to the Motion to Determine. See, e.g., Claims No. 14-1 and 15-1, Case No. 25-31552 (both in the amount of $0.00, but filed “to preserve Claimant's rights under the Indemnity Obligation”). None of the Non-Debtors have, as of yet, filed proofs of claim in the Debtors’ related chapter 7 cases.¹⁴ And the bar date to file proofs of claim in each of the chapter 7 cases has passed; it was October 14, 2025. See, e.g., Notice of Chp. 7 Bankr. Case – Proof of Claim Deadline Set (Doc. 12, Case No. 25-31552).

Over a month after these chapter 7 cases were filed the HCSG Companies filed a motion to compel deposition of the Non-Debtors’ corporate designee on September 18, 2025. Docket, Case #2024-07954, Ex. E to Mot. to Determine (Doc. 48-5 at 7). Apparently, this was in response to the Non-Debtors’ representative refusing to appear. The Non-Debtors then took the position that the State Court Litigation should be stayed based on the potential joint and several liability of the Debtors and the Non-Debtors, and the “potential for the recovery of substantial Medicaid receivables for the [Debtors] in the bankruptcies[.]” Email from Non-Debtors’ counsel, Ex. H to Mot. to Determine (Doc. 48-8). The HCSG Companies then, on October 10, 2025, withdrew their motion to compel deposition. See Docket, Case #2024-07954, Ex. E to Mot. to Determine (Doc. 48-5 at 7). And just over two weeks later, but approaching almost three months after the Debtors filed these chapter 7 cases, on October 29, 2025 the Non-Debtors filed a Motion for Protective Order and to Stay Proceedings, along with a Brief in Support of Motion for Protective Order and to Stay Proceedings (the “Motion to Stay”) in the State Court Litigation. Ex. A to Obj., Brief in Supp. of Mot. for Protective Order and to Stay Proceedings, Healthcare Servs. Grp., Inc. v. Broadview Nursing Home, Inc., No. 2024-07954 (C.P. Court, Bucks Cnty., Pa. Oct. 29, 2025) (Doc. 52-1 at 1-12)). In the Motion to Stay, the Non-Debtors sought “the entry of a protective order staying discovery at a minimum, but more appropriately, a stay of these proceedings altogether pending the resolution of the bankruptcy proceedings of the Debtor Defendants.” Mot. to Stay at 5 (Doc. 52-1 at 6). Notably, the Motion to Stay was asserted to be based on “the automatic stay of [ ] § 362(a)(1)[,]” as well as § 362(a)(3) and (6); essentially, that continuation of the State Court Litigation would violate these provisions. Mot. to Stay at 5, ¶ 5; 14-16.

Days before the State Court ruled on the Non-Debtors’ Motion to Stay, on November 3, 2025, the HCSG Companies filed the Motion to Determine in this Court (Doc. 48). The HCSG Companies assert, among other things, that the State Court “lacks subject-matter jurisdiction to determine the extent of the automatic stay in [the] Debtors’ bankruptcy cases[.]” Mot. to Determine at 13, ¶ 37. On November 24, 2025, the Non-Debtors, DMD and its “managed non-debtor skilled nursing facilities,” filed their Opposition of DMD Management and Its Managed Non-Debtor Nursing Facilities to the Motion of Healthcare Services Group to Determine the Applicability of the Automatic Stay to Claims Against Non-Debtors and for Related Relief (Doc. 52) (the “Objection”). And on December 1, 2025, the HCSG Companies filed their Reply to Opposition of DMD Management and Its Managed Non-Debtor Nursing Facilities to the Motion of Healthcare Services Group to Determine the Applicability of the Automatic Stay to Claims Against Non-Debtors and for Related Relief (Rel., Doc. 52) (Doc. 53) (the “Reply”).¹⁵

On November 5, 2025, the State Court entered an order (the “State Court Order”) staying “all proceedings” in the State Court Litigation “until further order of this Court pending the conclusion of the bankruptcy proceedings related to the Legacy Defendants[¹⁶ ] or upon stipulation and order.” Order, Healthcare Servs. Grp., Inc. v. Broadview Nursing Home, Inc., No. 2024-07954 (C.P. Court, Bucks Cnty., Pa.) (Ex. B to Obj., Doc. 52-1 at 14). The State Court Order did not contain any analysis concerning applicability of the automatic stay of these chapter 7 cases. The online docket for the State Court Litigation indicates that the State Court Order was only one (1) page, as attached to the Objection as Exhibit B, and that the day after entry of the State Court Order, the HCSG Companies, as Plaintiffs therein, filed a motion to reconsider, which was opposed by the Non-Debtors on December 11, 2025, and that there have been no further filings in the State Court Litigation since then. See Docket, Case #2024-07954, available at https://propublic.buckscountyonline.org/PSI/v/detail/Case/6327520#/.¹⁷

III. Jurisdiction

A. The Interlocutory State Court Order is Not Void Ab Initio, but this Court Still has Concurrent Jurisdiction Over Interpretation of the Scope of the Automatic Stay.

As to the Court's jurisdiction, which is rooted in 28 U.S.C. § 1334 and Amended General Order 05-02 (Amended Standing Order of Reference) of the United States District Court for the Southern District of Ohio, entered pursuant to 28 U.S.C.§ 157(a), interpreting the application of the automatic stay arising from a case under the Bankruptcy Code is often fundamental to the protection of debtors in bankruptcy and this Court's jurisdiction over those debtors and their property. And there is no dispute that the Debtors in these related chapter 7 cases before this Court are co-defendants in the State Court Litigation, except for Buckeye Chai, such that this Court has jurisdiction to determine that applicability of the automatic stay. The Motion to Determine now before the Court, however, is not for relief from the automatic stay pursuant to § 362(d); rather, the HCSG Companies ask this Court to issue an order to determine that “[t]he automatic stay of 11 U.S.C. § 362(a) does not apply to any claims or causes of action asserted by ․ [the HCSG Companies] against any or all of ․ [the Non-Debtor Entities].” Proposed Order (Doc. 48-1 at 6, ¶ 3) (Ex. A to Motion). Thus, the Motion does not seek enforcement of the automatic stay or allege that the automatic stay has been violated.¹⁸

Nobody is asserting that the State Court has interpreted the automatic stay too narrowly, such that the State Court Order is a de facto modification of the automatic stay. Instead, the HCSG Companies argue that the automatic stay has been applied too expansively, improperly providing reprieve from litigation to the Non-Debtors who did not file bankruptcy. This means, for now, that the Pennsylvania State Court and this Court have concurrent jurisdiction over this particular question. See, e.g., In re Baldwin-United Corp. Litig., 765 F.2d 343, 347 (2d Cir. 1985) (“The court in which the litigation claimed to be stayed is pending has jurisdiction to determine not only its own jurisdiction but also the more precise question whether the proceeding pending before it is subject to the automatic stay.”). In this regard, this Court's jurisdiction emanates from 28 U.S.C. § 1334(b), which provides, with exceptions not applicable here, that this Court “shall have original but not exclusive jurisdiction” in this type of situation; thus, “concurrent” jurisdiction. While the subject matter is clearly of interest to this Court, the fact that it concerns only non-debtor parties does give the Court pause. But given how integral the automatic stay is to the Bankruptcy Code and the conduct of cases before this Court, it is important for this Court to have the ability to examine and opine on the boundaries of the automatic stay arising from the present chapter 7 bankruptcy cases given the potential for implications on the cases before it.

If the automatic stay is determined to apply, which the “Sixth Circuit has consistently held” is within the concurrent jurisdiction of the non-bankruptcy court to decide, then this Court would have “exclusive jurisdiction to grant relief from the stay.” Wohleber v. Skurko (In re Wohleber), 596 B.R. 554, 571-72 (B.A.P. 6th Cir. 2019) (quoting Dominic's Rest. Of Dayton, Inc. v. Mantia, 683 F.3d 757, 760 (6th Cir. 2012) (citing NLRB v. Edward Cooper Painting, Inc., 804 F.2d 934, 939 (6th Cir. 1986)) and citing Cathey v. Johns-Manville Sales Corp., 711 F.2d 60, 62 (6th Cir. 1983) (“The legislative history of § 362(d) unambiguously identifies the bankruptcy court as the exclusive authority to grant relief from the stay.”); cf. Chao v. Hosp. Staffing Servs., Inc., 270 F.3d 374, 383 (6th Cir. 2001) (“[I]f the stay applies to an action directed at the debtor or its property, jurisdiction is exclusive in the bankruptcy court.”)). The key distinction, at least in the Sixth Circuit case law, is “between granting relief from the automatic stay and determining whether a particular action is stayed ․” Hamilton v. Herr (In re Hamilton), 540 F.3d 367, 375 (6th Cir. 2008) (discussing Singleton v. Fifth Third Bank (In re Singleton), 230 B.R. 533, 539 (B.A.P. 6th Cir. 1999) and stating that “granting relief from the automatic stay (effectively modifying the stay) would exceed a state court's jurisdiction in the same way that modifying a discharge order exceeds a state court's jurisdiction.”).

To summarize, while state courts have concurrent jurisdiction to determine whether the automatic stay applies in an action pending before the state court, bankruptcy courts have concurrent jurisdiction over the same issue, with the ability to have the final word; however, to the extent the automatic stay is determined to apply, bankruptcy courts have exclusive jurisdiction to grant relief from the automatic stay, such that any actions taken in violation thereof may be void. Hamilton, 540 F.3d at 375. Thus, the scope of the automatic stay has not been interpreted to be entirely equal, presumably emanating from a concern that a non-bankruptcy court could construe the automatic stay too narrowly and thereby impact a debtor, the debtor's property, or property of the estate, over which a bankruptcy court may need to have oversight. And in this regard, over the years since enactment of the Bankruptcy Code, courts have questioned whether non-bankruptcy courts “ought to” make such determinations, even when they can. In re Baldwin-United Corp. Litig., 765 F.2d at 347. In short, this Court and the Pennsylvania State Court “have concurrent jurisdiction to determine whether the automatic stay applies, but [this Court] has the final word.” In re Hall, No. 23-11129, 2024 Bankr. LEXIS 569, at *9 & n.19 (Bankr. D. Kan. Mar. 6, 2024) (citing In re Cole, 552 B.R. 903 (Bankr. N.D. Ga. 2016); In re Shrum, 597 B.R. 845, 854 (Bankr. E.D. Mich. 2019) (concluding that “if the state court wrongly decides that the stay does not apply and continues with a proceeding against the debtor, it has effectively granted relief from the stay, intruding on the exclusive jurisdiction of the bankruptcy court.”); In re Zausner, 638 B.R. 196 (Bankr. M.D. Fla. 2022); In re Gandy, 327 B.R. 796 (Bankr. S.D. Tex. 2005)). In other words, “[t]he bankruptcy court from which the automatic stay originated nonetheless has the final say.” JJW Metal Corp. v. Municipio Autonomo de Carolina (In re JJW Metal Corp.), No. 22-00030, 2024 Bankr. LEXIS 1450, at *24 (Bankr. D.P.R. June 20, 2024) (quoting In re Mid-City Parking, Inc., 332 B.R. 798, 804 (Bankr. N.D. Ill. 2005)). “If a state court erroneously determines that the automatic stay does not apply in a case,” which effects an “improper modification of the automatic stay[,]” then the state court actions may be “void ab initio.” Hall, at *8-9 & n.20 (citing Kalb v. Feuerstein, 308 U.S. 433, 438 (1940) (other citations omitted)).

But here we have the converse situation, which makes for an odd dynamic in which the HCSG Companies, in the context of pursuing claims against the Non-Debtors (who have not filed claims in these chapter 7 cases), are asking this Court to determine that the automatic stay of the chapter 7 cases before this Court is not as broad as applied by the State Court. Naturally, DMD and the Non-Debtor Defendants in State Court (and beneficiaries of this interpretation) are opposing any change to the stay put in place by the State Court Order. Moreover, although the current stay imposed in the State Court Litigation was requested by the Non-Debtors, and was apparently entered due to the filing of Debtors’ bankruptcy cases, it was entered without any express analysis of how the automatic stay applies to the State Court Litigation; however, it was obviously applied broadly, to stop the entirety of the action, even though there are claims against Non-Debtors. Thus, we have a situation in which the HCSG Companies are seeking a determination from this Court regarding the applicability of the automatic stay to the State Court Litigation that may or may not have any impact on the administration of these chapter 7 cases. But neither the HCSG Companies nor the Non-Debtor Entities have contested this Court's jurisdiction or authority to issue a final order on this question, it is very doubtful that they could, and this Court will proceed to determine the Motion within the framework of its jurisdiction to be final arbiter of the scope of the automatic stay arising from these chapter 7 cases. Even if the ultimate conclusion is that the automatic stay does not apply to the claims against the Non-Debtors in the State Court Litigation, this Court can opine on this question given that the automatic stay would not exist but for the chapter 7 cases before it.

The case law, as cited above, is fairly clear that this Court has jurisdiction to determine the applicability of the automatic stay arising from the cases before it. See also Flectat, Ltd. v. 4747 Montgomery Rd. Partners LLC, No. 1:21-cv-100, 2021 U.S. Dist. LEXIS 162265, at *3-4, 2021 WL 3847800 (S.D. Ohio Aug. 27, 2021) (“[A] federal district court before which an action is pending may resolve a challenge to the applicability [of] the automatic stay provision.”) (citing Dominic's Rest. Of Dayton, 683 F.3d at 760); NHI Reit of TX-IL, LLC v. LaSalle Grp., Inc., 387 F. Supp. 3d. 850, 851 (M.D. Tenn. 2019) (determining a motion as to whether the automatic stay applies to non-debtor defendants, including defendants in which the Debtor is the sole member); see also, e.g. Chao, 270 F.3d at 383-95 (determining District Court lacked jurisdiction because the automatic stay exception of 11 U.S.C. § 362(b)(4) did not apply); In re KVS Foodsystems, LLC, No. 08-07905-8-RDD, 2009 WL 1241272, at *3-4, 2009 Bankr. LEXIS 1184 (Bankr. E.D.N.C. Apr. 29, 2009) (determining the automatic stay did not apply to a non-debtor franchisee and sublessee); In re Virgin Oil Co., Inc., No. 09-11899, 2011 WL 4193224, at *1 (Bankr. E.D. La. Sept. 8, 2011) (finding that the automatic stay did not apply to non-debtor subsidiaries).

As a result of this Court and the State Court having concurrent jurisdiction over determining the applicability of the automatic stay to the State Court Litigation, and because the State Court Order embodied a cautious approach and did not work a modification of the automatic stay, the State Court Order cannot be said to be void ab initio as asserted by the HCSG Companies. The situations in which a state court order has been held void concern a converse situation in which the automatic stay is interpreted too narrowly, thereby de facto modifying the automatic stay in violation of a bankruptcy court's exclusive jurisdiction to modify the automatic stay. See, e.g., In re Wohleber, 596 B.R. at 576 (stating that “[w]hen courts proceed in error, actions violating the stay are invalid”); In re Hamilton, 540 F.3d at 375 for the proposition that state courts cannot “construe the discharge injunction incorrectly, because an incorrect application of the discharge injunction would be equivalent to a modification of the discharge order[;]” and Moore v. Nunnari (In re Moore), No. 08-1139, 2009 Bankr. LEXIS 4544, at *13 (Bankr. N.D. Ohio Mar. 20, 2009).¹⁹ An apt summary of the delicate balancing of jurisdiction between state and federal courts in this area was phrased as follows:

A nonbankruptcy court has jurisdiction to determine whether the stay applies, but, since the bankruptcy court has exclusive authority to vacate or modify the stay, any action by the nonbankruptcy court that results from too narrow a construction of the automatic stay risks being treated as void ab initio.

Pavelich v. McCormick, Barstow, Sheppard, Wayte & Carruth LLP (In re Pavelich), 229 B.R. 777, 783 (B.A.P. 9th Cir. 1999) (emphasis added) (citing Schwartz v. United States (In re Schwartz), 954 F.2d 569, 573-75 (9th Cir. 1992); Gonzalez v. Parks, 830 F.2d 1033 (9th Cir. 1987)). Here, because the State Court Order was not too narrow, but instead may have been too broad, it is not void ab initio.

The United States Court of Appeals for the Sixth Circuit found the foregoing analysis instructive almost a decade later in Hamilton v. Herr (In re Hamilton), 540 F.3d 367, 373-74 (6th Cir. 2008), stating that In re Pavelich concluded “that although state courts have unbridled authority to determine the dischargeability of debts, state courts have the authority to interpret a bankruptcy court's discharge order only to the extent that the state court's interpretation is correct.” Id. at 373 (citing In re Pavelich, 229 B.R. at 783-84). The Sixth Circuit has previously analyzed the jurisdictional balance between state and federal courts regarding the automatic stay in the context of analyzing the Bankruptcy Appellate Panel for the Sixth Circuit's opinion in Singleton v. Fifth Third Bank (In re Singleton), 230 B.R. 533 (B.A.P. 6th Cir. 1999). In re Hamilton, 540 F.3d at 374. The Sixth Circuit observed therein that:

importantly, the B.A.P. of the Sixth Circuit held that 11 U.S.C. § 362, that statute governing the automatic stay, granted exclusive jurisdiction to the district court to grant relief from the stay, but did not preclude a state court “from determining whether a matter pending before it is stayed by a party's bankruptcy filing.”

Id. at 375 (quoting In re Singleton, 230 B.R. at 539). Moreover, “[t]he Sixth Circuit B.A.P.’s distinction between granting relief from the automatic stay and determining whether a particular action is stayed mirrors the Ninth Circuit's distinction in In re Pavelich between modifying a discharge order and determining dischargeability.” Id.

Based on the foregoing, the State Court Order, which does not expressly and or impliedly modify the automatic stay, but rather appears to apply it broadly, cannot be said to be void ab initio. The remaining question, however, is whether the automatic stay applies as broadly as it was applied by the Pennsylvania State Court.

B. The Rooker-Feldman Doctrine Does Not Preclude this Court from Determining the Scope of the Automatic Stay.

There is one more jurisdictional matter to address before reaching the scope of the automatic stay arising from this and the related chapter 7 cases. While this Court has jurisdiction over the pending question, so does the State Court, although solely with respect to the State Court Litigation pending before it. So, what happens if the two Courts do not reach the same conclusion? That is where discussion of the Rooker-Feldman doctrine becomes relevant. That doctrine generally means that this Court, a federal trial court, cannot sit in appellate review of a final state court judgment because that is the role of the Supreme Court of the United States.²⁰ See In re Wohleber, 596 B.R. at 565-66 (“The Rooker-Feldman doctrine – derived from Rooker v. Fidelity Trust Co., 263 U.S. 413 ․ (1923), and revived after 60 years of disuse by District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 ․ (1983) – ‘generally provides that lower federal courts may not engage in appellate review of state-court decisions.’ ” (quoting Isaacs v. DBI-ASG Coinvestor Fund, III, LLC (In re Isaacs), 895 F.3d 904, 912 (6th Cir. 2018) (citing Hall v. Callahan, 727 F.3d 450, 453 (6th Cir. 2013))); see also In re Singleton, 230 B.R. at 537 (quoting Andrew M. Apfelberg, Rooker-Feldman: The “New” Abstention Doctrine for Practitioners in the Ninth Circuit, Am. Bankr. Inst. J. 1, 28 (Apr. 1998)). But the Rooker-Feldman doctrine is a general doctrine established in case law that over time has been applied to different degrees in different jurisdictions. See, e.g., In re Toussaint, 259 B.R. 96, 99 & 101 (Bankr. E.D.N.C. 2000) (Leonard, J.) (holding that the bankruptcy court lacked “subject matter jurisdiction to collaterally attack the state court's judgment that construed the claim to be nondischargeable[,]” but also recognizing that “some bankruptcy courts, th[ ]ough, disagree with this proposition” (citing Keenom v. All Am. Mktg. (In re Keenom), 231 B.R. 116, 128 (Bankr. M.D. Ga. 1999), 5 [ ] Collier on Bankruptcy ¶ 524.02[1] (15th ed. rev. 1999)).²¹

As a basic starting (and perhaps ending) point, for the Rooker-Feldman doctrine to apply there would need to be final order or judgment by the Pennsylvania State Court. Otherwise, this Court would not be acting as an appellate court in proceeding to determine applicability of the automatic stay of these chapter 7 cases to the State Court Litigation. And based on Pennsylvania case law, under which the State Court Order is interlocutory, both this Court and the State Court would have concurrent jurisdiction over the application of the automatic stay to the State Court litigation. In this situation, in which the State Court Order has simply stayed the State Court Litigation for a currently unknown period of time – until these chapter 7 cases have been resolved – there is no final order by the Pennsylvania State Court. The language of the State Court Order, in its entirety, is as follows:

AND NOW, this 5th of November, 2025, upon consideration of the Motion for Protective Order and to Stay Proceedings and any response thereto, it is hereby ORDERED and DECREED that said Motion is GRANTED. It is further ORDERED and DECREED that all proceedings in the above-captioned matter, including all calculations of time, are hereby STAYED until further order of this Court pending the conclusion of the bankruptcy proceedings related to the Legacy Defendants or upon stipulation and order.

Ex. B to Opp. of Non-Debtor Entities (Order, Healthcare Servs. Grp., Inc. v. Broadview Nursing Home, Inc., No. 2024-07954 (C.P. Bucks County, Penn. Nov. 5, 2025). Presumably, the Pennsylvania State Court could revisit this issue at any time. And, in fact, the docket for the State Court Litigation indicates that the HCSG Companies have moved for reconsideration of the State Court Order on November 6, 2025, the Non-Debtor Entities responded on December 11, 2025, and there has been no further activity on the docket since then. Moreover, as noted above, case law in Pennsylvania confirms that such an order staying litigation in Pennsylvania state court based on the automatic stay arising from a bankruptcy case is interlocutory and not appealable. See, e.g., Cox v. Reilly, No. 113 C.D. 2012, 65 A.3d 477, 2013 Pa. Commw. Unpub. LEXIS 312, at *5-6, 2013 WL 3970229 (Pa. Commw. Ct. Apr. 18, 2013) (holding that the trial court's order, which granted a stay but did “not dispose of all claims and all parties” is interlocutory and that “[a]n order granting a stay because of the Bankruptcy Code's automatic stay provisions is not one of the enumerated interlocutory orders appealable as of right.”).

In addition to the foregoing, interpretation of the automatic stay is different. Although “[c]ourts have reached differing results on whether the Rooker-Feldman doctrine applies to prevent a bankruptcy court from reviewing a state court's determination of whether the automatic stay applies[,]” many courts “have concluded that a bankruptcy court may review such decisions.” Goodson v. Goodson (In re Goodson), No. 17-41820-JJR, 2018 Bankr. LEXIS 301, at *28 (Bankr. N.D. Ala. Feb. 5, 2018) (citing Kalb, 308 U.S. 433). In addition to the rationales described in section III.A above, cases holding that the Rooker-Feldman doctrine does not bar bankruptcy court review of state court orders construing the automatic stay reason that:

Bankruptcy courts are specialized courts, well versed in the application of the automatic stay, and must have authority to review a state court's determination of whether the stay applies in order for a debtor to have the full protection of the automatic stay as provided for in the Bankruptcy Code.

Id., at *30 (citing In re Cole, 552 B.R. 903, 908-09 (Bankr. N.D. Ga. 2016); In re Long, 564 B.R. 750 (Bankr. S.D. Ala. 2017); and In re Clarke, 373 B.R. 769, 771 (Bankr. S.D. Fla. 2006) (“Rooker-Feldman doctrine does not abrogate the bankruptcy court's authority to enforce the automatic stay.”)).

In short, this is one area in which many courts, including those in the Sixth Circuit, have determined that a bankruptcy court should, and does, have the authority to have the “last word.” Because the automatic stay originates from the bankruptcy case, “collateral challenges to a state court's automatic-stay determination are not forbidden ․ because the bankruptcy court is viewed as enforcing its own injunction pursuant to the Supremacy Clause rather than conducting unauthorized appellate review of a state court order.” In re JJW Metal Corp., 2024 Bankr. LEXIS 1450, at *24 (quoting In re Mid-City Parking, Inc., 332 B.R. at 805). At the same time, as also noted above, “assuming its jurisdiction is otherwise sound, the non-bankruptcy court may enter orders not inconsistent with the terms of the stay.” Id., at *24-25 (quoting Moxon v. Findling (In re Moxon), No. 05-74864, 2006 U.S. Dist. LEXIS 14893, at *7 (E.D. Mich. Mar. 31, 2006)).

The Rooker-Feldman doctrine, even though it typically prohibits a federal court from acting as a de facto appellate court of a state court determination, does not apply to the specific circumstance in which a bankruptcy court is opining on the scope of the automatic stay arising from a bankruptcy case before it, particularly with respect to an interlocutory stay order issued by a state court. To hold otherwise would create an undesirable situation in which a state court could determine the parameters of the automatic stay, which could, right or wrong, potentially have a negative impact upon the estate being administered in bankruptcy (although that is not the situation alleged here). In this limited regard, a state court, even if it has concurrent jurisdiction, does not have the last word.²² Therefore, the Non-Debtors’ argument that the Rooker-Feldman doctrine prevents this Court from analyzing the applicability of the automatic stay due to the existence of the State Court Order is unavailing.

Moreover, in this case, it is unclear to what extent, if any, the Pennsylvania State Court analyzed the applicability of the automatic stay, as acknowledged by the Non-Debtors. See Obj. at 10, ¶ 17 (stating “[t]he Pennsylvania Order does not set forth the reasons for the Pennsylvania Court's decision.”). The Non-Debtors cite In re Singleton, 230 B.R. 533 (B.A.P. 6th Cir. 1999) for the proposition that the Rooker-Feldman doctrine applies to a state court's determination of the applicability of the automatic stay. Obj. Doc. at 14, ¶ 28. In Singleton, the Bankruptcy Appellate Panel for the Sixth Circuit (the “Panel”) determined that, under the Rooker-Feldman doctrine, the bankruptcy court lacked jurisdiction to determine a stay violation adversary proceeding because the state court had already determined, through a final judgment, that the property in question was not owned by the debtor, but instead the debtor's corporation. 230 B.R. at 538-39. But that decision, discussed above, concerned a final judgment issued by a state court on a claim asserted for violation of the automatic stay, which the debtor pursued outside of bankruptcy court. And it does not appear there was a concern that the state court incorrectly applied, and therefore effectively modified, the automatic stay; rather, it was more like the situation in In re Toussaint in which the debtor decided to litigate a discharge matter to conclusion in state court and only came back to bankruptcy court after the state court entered a final judgment they did not like. Here, there is no final judgment or adjudication of rights; rather, there is just an order staying the state court proceeding for an undetermined amount of time, subject to further order of the Pennsylvania State Court or stipulation by the parties.

The Singleton Panel also cited the Rooker-Feldman doctrine as standing for the proposition that “a lower federal court” is barred “from conducting a virtual ‘review’ of a state court judgment for errors in construing federal law or constitutional claims ‘inextricably linked’ with the state court judgment.” Id. at 536. However, as the Panel noted twenty years later in Wohleber, Singleton was decided before the Supreme Court's decision in Exxon Mobil “clarified that the doctrine does not incorporate preclusion law[,]” narrowed the limits of the Rooker Feldman doctrine, and noted that “lower federal courts have variously interpreted the Rooker-Feldman doctrine to extend far beyond the contours of the Rooker and Feldman cases[.]” Wohleber, 596 B.R. at 566 (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283 (2005)). Thus, “the [Supreme] Court has frequently returned to this issue to reiterate the narrow scope of the doctrine.” Id. (citing Exxon, 544 U.S. at 283; Lance v. Dennis, 546 U.S. 459 (2006); Skinner v. Switzer, 562 U.S. 521, 531 (2011)). Moreover, Singleton was an opinion by the Bankruptcy Appellate Panel and, twenty (20) years later, its validity has been questioned by another Panel in Wohleber. 596 B.R. 554. Further, without wading into the issue of whether Panel decisions are binding precedent or simply persuasive authority, the fact is that the Sixth Circuit remains the higher authority within the hierarchy of bankruptcy appeals. See, e.g., In re Terrell, No. 08-60172, 2009 Bankr. LEXIS 1459, at *16-19 (Bankr. N.D. Ohio Jan. 15, 2009) (Kendig, J.) (deciding that Panel decisions are persuasive authority, but not binding precedent, and discussing, amongst other opinions, Rhiel v. OhioHealth Corp. (In re Hunter), 380 B.R. 753 (Bankr. S.D. Ohio 2008) (“holding that, in the interests of uniform case law throughout a district and predictability of results, bankruptcy courts should treat bankruptcy appellate panel decisions as binding”)). Accordingly, to the extent that Singleton would be interpreted to mean that a bankruptcy court cannot be the “final word” on reviewing the scope of the automatic stay arising from a bankruptcy case over which it has jurisdiction, the Singleton decision would conflict with and yield to the Sixth Circuit Court of Appeals precedent cited herein; however, there does not appear to be a conflict given that the Pennsylvania State Court has not interpreted the automatic stay narrowly to effect a modification of the automatic stay and has not issued a final order.

Subsequent to Singleton, the Sixth Circuit specifically determined that “[i]f a state court and the bankruptcy court reach differing conclusions as to whether the automatic stay bars maintenance of a suit in the non-bankruptcy forum, the bankruptcy forum's resolution has been held determinative, presumably pursuant to the Supremacy Clause.” Chao v. Hosp. Staffing Servs., Inc., 270 F.3d 374, 385 (6th Cir. 2001). That decision follows from even older Sixth Circuit law stating “while nonbankruptcy courts may independently determine whether the automatic stay applies and proceed when they determine it does not ․ they ‘proceed at their own risk.’ ” McCafferty v. DeWine (In re McCafferty), 571 B.R. 267, 274 (Bankr. N.D. Ohio 2017) (quoting Edward Cooper Painting, 804 F.2d at 940); In re Shrum, 597 B.R. 845, 854 (Bankr. E.D. Mich. 2019) (similar). As a result, insofar as this Court is asked to opine on the applicability of the automatic stay originating from this and the related chapter 7 bankruptcy cases, this Court has jurisdiction, and the Rooker-Feldman doctrine does not preclude this Court from proceeding to decide the applicability of the automatic stay to the State Court Litigation, which is addressed in the analysis below.

IV. Analysis

A. The Non-Debtors Have Neither Sought an Injunction Under § 105(a) Nor Moved for a Determination of Applicability of the Automatic Stay, and Only the Debtors and Trustee Likely Have Standing to Request Such an Injunction.

Although the parties have focused on the applicability of the “unusual circumstances” test, at least with respect to the automatic stay under § 362(a)(1) and (6), they have put the cart before the horse. As it concerns those provisions of the automatic stay, which apply to actions “against the debtor,” that test would only become relevant in the context of a party seeking an injunction through an adversary proceeding to impose a stay of actions against the Non-Debtors in the State Court Litigation, a step no party has taken.²³ Not only that, but it is the party seeking to “extend” the automatic stay beyond its statutory terms that typically bears the “burden of showing ‘unusual circumstances[.]’ ” Zwick Partners, LP v. Quorum Health Corp., 456 F. Supp. 3d 949, 951 (M.D. Tenn. 2020) (citing NHI RIET of TX-IL, LLC v. LaSalle Grp., Inc., 387 F. Supp. 3d 850, 851-52 (M.D. Tenn. 2019) (citations omitted)). Here, the Non-Debtors have not moved, much less initiated an adversary proceeding, to extend the automatic stay.²⁴ As analyzed in Harker v. Eastport Holdings, LLC (In re GYPC, Inc.), “[i]n the Sixth Circuit, extending the stay for ‘unusual circumstances’ requires an injunction under 11 U.S.C. § 105 because it would apply the stay to parties not included by the plain language of § 362(a)(1).” 634 B.R. 983, 1002-03 (Bankr. S.D. Ohio 2021) (Humphrey, J.) (citing In re Johnson, 548 B.R. 770, 788 (Bankr. S.D. Ohio 2016) (“In Patton, the Sixth Circuit made it clear that the unusual circumstances test does not mean the stay applied automatically by its terms to actions against nondebtors.”)).²⁵ And similar to the situation in Harker, here the Trustee “has not sought any such extraordinary relief with this court despite having notice of the State Court Action.” Harker, 634 B.R. at 1002. Thus, prosecution of the State Court Litigation against the Non-Debtors presently cannot be stayed pursuant to either § 362(a)(1) or (6).

A party seeking an injunction must commence an adversary proceeding. Fed. R. Bankr. P. 7001(g) (formerly 7001(7), prior to the amendments that took effect on Dec. 1, 2024). Thus, an adversary proceeding would be required to “extend” the provisions of the stay that automatically protect the Debtors – § 362(a)(1) and (6) – to the Non-Debtors pursuant to § 105(a). See Fed. R. Bankr. P. 7001(g); see also Zwick Partners, LP, 456 F. Supp. 3d at 951 (explaining that “[c]ourts sometimes frame the issue as whether they should ‘extend’ the automatic stay, but it is important to note the distinction between enforcing an automatic stay under § 362(a) and extending an automatic stay beyond its statutory terms.”) Moreover, “[c]ourts have been near universal in reversing injunctions which have been issued without compliance with Rule 7001.” 2 Collier on Bankruptcy ¶ 105.03[4][a] & n.80 (16th ed. 2025) (collecting cases).

Accordingly, within the Sixth Circuit, there is no basis for the Non-Debtors to claim that the provisions of the automatic stay that, by their plain language, only prevent action “against the debtor” – § 362(a)(1) and (6) – should extend beyond those statutory terms. See Zwick Partners, LP, 456 F. Supp. 3d at 951 (citing Amedisys, Inc. v. Nat'l Century Fin. Enters., Inc. (In re Nat'l Century Fin. Enters., Inc.), 423 F.3d 567, 579 (6th Cir. 2005); In re Johnson, 548 B.R. 770, 788 (Bankr. S.D. Ohio 2016)).

In addition, “[s]tanding to bring the adversary proceeding to enjoin the actions of a third party rests with the debtor, debtor in possession or the trustee, and not with the [liable] third party.” 2 Collier on Bankruptcy ¶ 105.03[4][b] & n.81 (emphasis added) (citing In re Munoz, 73 B.R. 283, 285 (Bankr. D.P.R. 1987) but also noting that “[s]ome courts have held that creditors have standing under section 105 to bring actions seeking to hold other creditors in civil contempt” (citing Barnett Bank v. Trust Co. Bank (In re Ring), 178 B.R. 570, 576 (Bankr. S.D. Ga. 1995) (collecting cases))); see also 2 Collier on Bankruptcy ¶ 105.03[1] & n.2 (“In the bankruptcy context, the estate (or estate representative) is the entity with standing to seek an injunction under section 105” (citations omitted)).

Although the Non-Debtors have suggested they may pursue an adversary proceeding in the future (presumably if the State Court were to vacate its order staying the State Court Litigation (Doc. 52 ¶ 21, at 12)), this would be an uphill battle, if even possible. An injunction under § 105(a) is a rare remedy. In re Nat'l Staffing Servs., LLC, 338 B.R. 35, 37 (Bankr. N.D. Ohio 2005) (citing Patton, 8 F.3d at 349). And neither of the parties now before the Court would even appear to have standing to seek any such injunction. Amedisys, Inc., 423 F.3d at 579 (“Normally, a debtor initiates an adversary proceeding in order to request a § 105 preliminary injunction.”) (citing Am. Imaging Servs. v. Eagle-Picher Indus., Inc. (In re Eagle-Picher Indus., Inc.), 963 F.2d 855, 857-59 (6th Cir. 1992)). Further, it is doubtful that an injunction to extend § 362(a)(1) and (6) to non-debtors makes much sense in the context of chapter 7 cases like these which do not involve any on-going operations ²⁶ and in which the corporate Debtors cannot obtain a discharge. See, e.g., In re Trans-Serv. Logistics, 304 B.R. 805, 807 (Bankr. S.D. Ohio 2004) (“[I]t is incumbent upon the non[-]bankrupt party to establish that there is a unity of interest with a debtor so that the reorganization efforts of the debtor would be irreparably harmed by the continuation of the litigation.” (collecting cases)). Remember that in these chapter 7 cases the Debtors sold their assets prepetition and have no ongoing operations, such that no healthcare ombudsman was appointed. Accordingly, the typical justification for an injunction under § 105(a) – that it would prevent interference with a reorganization by preserving assets and preventing a burden upon the principals working on the reorganization – simply does not exist. See, e.g., 2 Collier on Bankruptcy ¶ 105.04[1] & n.4 (stating that “[w]hen, however, the individual or entity who is co-liable is necessary or desirable for the debtor's reorganization, the estate gains an interest in how the creditor exercises its nonbankruptcy remedies.” (citing Noel Mfg. Co., Inc. v. Marathon Mfg. Co., 69 B.R. 120, 121 (N.D. Ala. 1985) (collecting cases))).

An injunction is only possible under narrow circumstances. In re Trans-Serv. Logistics, 304 B.R. at 807 (“[T]his court has the authority to extend the automatic stay to non-bankrupt parties, under limited circumstances.”); In re Burgess, No. 310-02023, 2010 Bankr. LEXIS 1352, at *2 (Bankr. M.D. Tenn. Apr. 26, 2010) (“[U]nder unusual circumstances, the Court can extend the stay to a non-debtor entity.”); see also Stoller v. Baldwin-United Corp., 41 B.R. 884, 889 (Bankr. S.D. Ohio 1984) (discussing Lynch v. Johns-Manville Sales Corp., 710 F.2d 1194 (6th Cir. 1983). The cases discussing injunctions are almost always chapter 11 reorganizations, not chapter 7 cases. See e.g., Lynch v. Johns-Manville Sales Corp., 710 F.2d 1194, 1199-1200 (6th Cir. 1983) (finding “no basis” to stay litigation against solvent non-debtor co-defendants). And neither party appears to have cited any case law in which such an injunction has been granted within a chapter 7 case.²⁷ Moreover, although this matter comes before the Court on the Motion to Determine filed by the HCSG Companies, the Non-Debtors, who seek the benefit of the Debtors’ automatic stay, have the ultimate burden of supporting their assertion that the automatic stay in these related chapter 7 cases should protect them elsewhere.

As a practical matter, not extending the automatic stay to non-debtor entities – beyond its statutory bounds – makes sense and provides some modicum of clarity. For example, to hold that the stay under § 362(a)(1) or (6) would automatically apply to claims against the Non-Debtors upon the filing of the Debtors’ bankruptcy cases would cause far more uncertainty and arm those who have chosen not to file bankruptcy with the benefits of a bankruptcy. And, at its essence, that is what the Supreme Court of the United States has told us is not permissible, albeit in the context of plan injunctions. Harrington v. Purdue Pharma L.P., 603 U.S. 204, 220-221 (2024). Now, that is not to say that it is inappropriate for a state court and the parties to tread cautiously and to possibly even impose a temporary stay for the purposes of giving debtors or a trustee time to initiate an adversary proceeding to seek the imposition of an injunction to stay the claims against a non-debtor under the “unusual circumstances” test, but that is different than seeking a broad application of the automatic stay beyond its statutory terms, which is what the Non-Debtors want. The Court could speculate as to why the Non-Debtors have not sought an injunction in this Court, but suffice it to say that because no party has moved to “extend” the automatic stay (actually, to impose an injunction under § 105(a)), and because it is doubtful they would even have standing to do so, the resolution of the Motion to Determine, at least as it concerns § 362(a)(1) and (6), is ultimately straightforward. These provisions of the automatic stay do not apply to protect the Non-Debtors.

B. Apart from the Absence of an Injunction, The “Against the Debtor” Provision of the Automatic Stay in § 362(a)(1), Which is Strictly Construed, Does Not Apply.

The Bankruptcy Code protects debtors from, amongst other activities, entities commencing or continuing prepetition litigation to recover upon a prepetition claim. § 362(a)(1). It is fundamental, however, that such protection of the automatic stay does not apply to non-debtors. In re Johnson, 548 B.R. at 785. And the stay under § 362(a)(1) does not apply to other non-debtor co-defendants; namely, the Non-Debtors in the State Court Litigation. Flectat, Ltd., 2021 U.S. Dist. LEXIS 162265, at *5 (citing Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 314 (6th Cir. 2000) (“absent unusual circumstances the stay ‘does not extend ․ to separate legal entities such as corporate affiliates, ․ or to codefendants in pending litigation’ ”)).

The phrase “against the debtor” in § 362(a)(1) “is to be strictly construed.” In re Cincom iOutsource, Inc., 398 B.R. 223, 226 (Bankr. S.D. Ohio 2008) (Hopkins, J.). For emphasis, and in slightly different phrasing, “[t]he Sixth Circuit has made it abundantly clear that the § 362(a)(1) stay of acts ‘against the debtor’ is to be strictly construed.” Freightjoy Logistics, Inc. v. Harvest Sherwood Food Distribs., Inc., No. 25-10974, 2025 U.S. Dist. LEXIS 215534, at *2 (E.D. Mich. July 10, 2025) (quoting In re Johnson, 548 B.R. at 787 (quoting In re Cincom iOutsource, Inc., 398 B.R. at 226)). The automatic stay will only apply to “[a]ctions against nondebtor defendants ․ in unusual circumstances, which occur when ‘there is such identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor.’ ” Id. (quoting In re Johnson, 548 B.R. 787 (quoting In re Eagle-Picher Indus., Inc, 963 F.2d at 861)). The Sixth Circuit has applied § 362(a)(1) in “three categories of circumstances—‘when the non-debtor defendant is entitled to absolute indemnity by the debtor, where the stay would contribute to the debtors’ reorganization, or where there is such identity between the debtor and the [non-debtor] that a judgment against the [non-debtor] defendant will in effect be a judgment or finding against the debtor.’ ” Harker, 634 B.R. at 1002 (quoting Plastech Holding Corp. v. WM GreenTech Auto. Corp., No. 17-2122, 2018 U.S. App. LEXIS 16915, at *1-2 (6th Cir. June 21, 2018)).

The Debtors’ role in a chapter 7 case post-petition is limited. The Trustee is charged with administering and liquidating assets and objecting to proofs of claim. If the Trustee is concerned with discovery requests somehow affecting the administration of these chapter 7 cases, she can raise those issues at the appropriate time. But it appears that written discovery has been completed, and the fact that the Debtors may share a management company (DMD) or have common officers does not somehow create a burden on the Debtors, and the Non-Debtors have not articulated how this would be so. The fact that Mr. Taylor, who is the Chief Executive Officer of DMD, is also the responsible person for the Debtors pursuant to Local Bankruptcy Rule (“LBR”) 1074-1 does not, by itself, create a burden. Individuals often wear different hats for different occasions, and it appears that is the case for Mr. Taylor. In actuality, it appears that DMD, which was engaged as the Liquidation Administrator for the Debtors prior to the filing of these chapter 7 cases, will shoulder (and, it appears, has already shouldered) the burden of responding to discovery.

Finally, a judgment against the Non-Debtors does not resolve the Debtors’ liability to the HCSG Companies. The fact that the Debtors and Non-Debtors may ultimately be jointly and severally liable is insufficient to extend the stay to the Non-Debtors. The automatic stay does not ordinarily extend to protect co-obligors or guarantors in the absence of an injunction. And again, the fiduciary of these estates, the Trustee, does not appear concerned. The Sixth Circuit has explained that the fact that a non-debtor is a co-defendant in litigation does not justify applying the stay absent “unusual circumstances.” Parry, 236 F.3d 299 (citing Patton, 8 F.3d at 349).

A body of case law allows injunctions when the debtor and the third-party seeking stay protection have an “identity of interests.” In re Nat'l Staffing Services, LLC, 338 B.R. at 37. But the Debtors and the Non-Debtors do not have the pertinent type of identity of interests, which typically exists when the suit against the non-debtor will deplete the bankruptcy estate. In these cases, as discussed above, even if the Debtors are ultimately jointly and severally liable (although this is to be addressed in the claims allowance process) and the Non-Debtors maintain an indemnification claim, it appears that every dollar paid by the Non-Debtors would reduce the Debtors’ ultimate liability to the HCSG Companies, which have timely filed proofs of claim; whereas the Non-Debtors have not. Id. at 38 (citing Class Five Nev. Claimants v. Dow Corning Corp. (In re Dow Corning Corp.), 280 F.3d 648, 658 (6th Cir. 2002)). It will be up to the Trustee to determine whether to file objections to claims. But until then, it would appear that the progress of the State Court Litigation against the Non-Debtors, to the extent it could potentially reduce the overall joint and several liability, would either not have an impact upon the ultimate distribution to creditors in these chapter 7 cases or, potentially, would increase the funds available to distribute to other creditors.

C. The “Against the Debtor” Provision of the Automatic Stay in § 362(a)(6) also Does Not Apply.

Section 362(a)(6) prohibits “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case[.]” “The case law under § 362(a)(6) typically addresses acts of collection against a debtor or persons associated with the debtor that are not based upon a formal court proceeding.” Harker, 634 B.R. at 1002 n.9; see Harchar v. U.S. (In re Harchar), 694 F.3d 639, 648 (6th Cir. 2011) (quoting Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 423 (6th Cir. 2000) (“A course of conduct violates § 362(a)(6) if it (1) could reasonably be expected to have a significant impact on the debtor's determination of whether to repay, and (2) is contrary to what a reasonable person would consider to be fair under the circumstances.”)). Here, the only concern is the State Court Litigation. Moreover, as with § 362(a)(1), it is only actions “against the debtor” that are stayed by § 362(a)(6). In the absence of an injunction under § 105(a), the automatic stay cannot be extended beyond the Debtors.

In this instance, the Non-Debtors, curiously concerned about the welfare of the Debtors’ estates, argue that since the allegations against the Debtors and the Non-Debtors are identical, a judgment by the HCSG Companies against the Non-Debtors “would establish the amount of HCSG's claims against the Debtors and the validity of the Debtors’ defenses to the charges.” (Doc. 52 at 16.) The Non-Debtors argue that the HCSG Companies are “attempting to circumvent the orderly liquidation process by litigating its disputed claims against the Debtors in the State Court action” and by seeking to hold the Non-Debtors derivatively liable in the State Court Litigation Obj. at 15, ¶ 32. The Non-Debtors argue this is a stay violation as “an act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title.” 11 U.S.C. § 362(a)(6). But there will not be a judgment against the Debtors because, as the Non-Debtors acknowledge, the automatic stay prevents the HCSG Companies from proceeding against the Debtors. Obj. at 10, ¶ 15 (stating “[t]here is no dispute that the automatic stay prohibits HCSG from proceeding against the Debtors in the Pennsylvania Court.”). Accordingly, any such judgment against the Non-Debtors would not be preclusive, and the Debtors’ obligations to the HCSG Companies will be determined in this Court through the claims allowance process if the Trustee determines there is a purpose to be served in objecting to claims. Lynch, 710 F.2d at 1199 (“[D]uplicative or multiple litigation which may occur is a direct by-product of bankruptcy law. As such, the duplication, to the extent that it may exist, is congressionally created and sanctioned.”).

The efficiency-based argument by the Non-Debtors also holds no water as waiting until the chapter 7 bankruptcies are over to resume the State Court Litigation would appear to accomplish nothing but delay resolution given that the Debtors are not presently in control of the estates, are already no longer operating, and will practically not exist after the bankruptcy, such that, as an equitable matter, the HCSG Companies should be allowed to proceed to obtain a determination of their claims against (and solely against) the Non-Debtors. Moreover, as the Non-Debtors also acknowledge, DMD, through its CEO, Mr. Taylor, will be the one who may participate in any further discovery.

D. The Non-Debtors’ Arguments Concerning Application of the “Property of the Estate” Provision of the Automatic Stay (§ 362(a)(3)) to the State Court Litigation are Neither Persuasive Nor Supported by Sixth Circuit Case Law.

As observed in the Cincom iOutsource case, if the parties’ “arguments for extension of the stay” only focused on § 362(a)(1), “our work would be done.” In re Cincom iOutsource, Inc., 398 B.R. at 227. But § 362(a)(3) of the Bankruptcy Code does not concern actions against a debtor; rather, it prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate[.]” 11 U.S.C. § 362(a)(3); see also Chicago v. Fulton, 592 U.S. 154, 156 (2021). The Non-Debtors’ theory that the continuation of the State Court Litigation will somehow affect property of the Debtors’ estates fails under established case law in the Sixth Circuit.

In some narrow situations, litigation against a non-debtor party can impact estate property and thus implicate whether the automatic stay should apply to that litigation. The Non-Debtors argue that the State Court Litigation, as against them, would be prohibited under § 362(a)(3). But it is not. The present situation appears to be nothing more than a co-obligor situation that courts have found does not implicate property of the bankruptcy estate within the meaning of § 362(a)(3). “It is universally acknowledged that an automatic stay of proceeding accorded by § 362 may not be invoked by entities such as sureties, guarantors, co-obligors, or others with a similar legal or factual nexus to the Chapter 11 debtor.” Lynch, 710 F.2d at 1196 (quoted in Zwick Partners, LP, 456 F. Supp. 3d at 952).

An analysis of § 362(a)(3) as applied to litigation against non-debtors is fact specific. Harker, 634 B.R. at 1006. The Non-Debtors argue that DMD, the common management company of the Debtors and the Non-Debtors, would be supplying information that may be relevant to the Non-Debtors’ litigation against the HCSG Companies. But the Non-Debtors do not cite any case law supporting the concept that litigation would affect property of the Debtors’ bankruptcy estates merely because a Non-Debtor manager of the Debtors may have to participate in discovery. The Non-Debtors, actually DMD, asserts that it has custody of “Debtors’ documents” which is “property of the Debtors’ estates” such that the HCSG Companies’ discovery will violate § 362(a)(3) of the automatic stay. Obj. at 16, ¶ 33. But according to the HCSG Companies, written discovery in the State Court Litigation has already been completed. Reply at 7, ¶ 7. Either way, the issue of conducting discovery is typically examined under § 362(a)(1), not (a)(3), and the Non-Debtors have not shown that the discovery which remains to be conducted in the State Court Litigation would impose “ ‘a substantial burden’ ” on the Debtors, such that there are “unusual circumstances.” See, e.g., Innerwood & Co., LLC v. Privett (In re Privett), 557 B.R. 580, 585-87 (S.D. Ohio 2016) (concluding that “in the absence of unusual circumstances, an automatic stay pursuant to § 362 should not be extended to prohibit taking discovery from a debtor in proceedings against solvent defendants” and reversing the Bankruptcy Court's ruling, as an abuse of discretion, noting there was “no factual support for the assertion that the deposition would impose a substantial burden on the bankruptcy estate or have an adverse impact on other creditors.” (citing In re Johnson, 548 B.R. at 787)).

With respect to 11 U.S.C. § 362(a)(3), which stays acts concerning property of the estate, no party is claiming that the Non-Debtors are presently in possession of any property of the estate, beyond documents subject to discovery. Rather, the Non-Debtors, via DMD, assert that “DMD has custody of the information[.]” Obj. at 16, ¶ 33. As noted in the background, the State Court Litigation appears to be a five (5) count breach of contract and unjust enrichment suit for money judgment versus the defendants named therein, which include both Debtors and Non-Debtors. Thus, this situation is distinguishable from the Amedisys case in which a suit was held to violate § 362(a)(3) “because Amedisys was trying to obtain property of the estate” that were “funds in a JP Morgan account titled in the name of one of the debtors.” In re Cincom iOutsource, Inc., 398 B.R. at 232-33 (discussing Amedisys, Inc., 423 F.3d 567). A suit to collect money, as opposed to a suit to “obtain possession of specific property in which the debtor possessed at least a legal interest on the petition date[,]” does not raise the same concerns and does not implicate § 362(a)(3). In re Cincom iOutsource, Inc., 398 B.R. at 233. Rather, the alleged nexus is that the Non-Debtors would be entitled to indemnification from the Debtors if the Non-Debtors are found liable to the HCSG Companies.

In some situations, a judgment against a non-debtor co-obligor has been found to warrant application of the stay in § 362(a)(3); however, the non-debtor must show that the indemnification obligation will deplete estate assets or interfere with the debtor's reorganization. See, e.g., In re Tamarack Dev. Assocs., LLC, 611 B.R. 286, 295 (Bankr. W.D. Mich. 2020) (citing Amedisys, Inc., 423 F.3d at 578); In re Allen, No. 11-12927, 2015 Bankr. LEXIS 401, at *30 (Bankr. W.D. Tenn. Jan. 14, 2015); Harker, 634 B.R. at 1003-05 (analyzing § 362(a)(3) and collecting cases); In re Cincom iOutsource, Inc., 398 B.R. at 228 (“the Sixth Circuit has stated that the focus of the inquiry under § 362(a)(3) is on whether a judgment against the solvent codefendants would actually deplete the bankruptcy estate.”). Here, there is no assertion that the claims the HCSG Companies are pursuing against the Non-Debtors will deplete any estate assets and there is no reorganization to interfere with, so § 362(a)(3) has not been shown to apply.

The Trustee, not the Debtors, controls the property of the bankruptcy estates and is responsible for liquidating those assets and determining the validity of claims. 11 U.S.C. § 704(a)(1), (2), and (5). But despite being the fiduciary and objective party protecting the interests of the Debtors’ bankruptcy estates, she has no opposition to the Motion to Determine and has not raised any concerns with the continuation of the State Court Litigation. Accordingly, it does not appear that continuation of the State Court Litigation against the Non-Debtors would be burdensome to the Trustee or deplete the property of the estates. And there is no reorganization to interfere with. At most the State Court Litigation might give rise to a claim for indemnification by Non-Debtors or DMD;²⁸ however, that would presumably reduce the HCSG Companies’ claims. And if the Non-Debtors tardily file claims in these chapter 7 cases they would more than likely receive no distribution because any distribution on such a tardily filed claim would be junior (third) to the timely filed proofs of claim. See § 727(a)(3) (providing that “property of the estate shall be distributed ․ third, in payment of any allowed unsecured claim proof of which is tardily filed under section 501(a) of this title, other than a claim of the kind specified in paragraph (2)(C) of this subsection”). Accordingly, based on the record currently before this Court, this is not a situation in which any property of the estate is at risk such that the automatic stay under § 362(a)(3) would apply to stay claims against the Non-Debtors in the State Court Litigation.

Cases applying § 362(a)(3) to litigation not involving the debtor focus on a directly affected property interest, not the mere conduct of discovery to obtain a judgment against a non-debtor to collect from the non-debtor's funds. See, e.g., In re Res. Energy Techs., LLC, 419 B.R. 746, 747 (Bankr. W.D. Ky. 2009). Were it otherwise, the automatic stay would broadly apply to non-debtor parties that have not availed themselves of the bankruptcy process, a concept that the Sixth Circuit has consistently rejected:

[n]othing in the legislative history counsels that the automatic stay should be invoked in the manner which would advance the interests of some third party, such as the debtor's co-defendants, rather than the debtor, or its creditors. This court concurs with the district court's conclusion that “it would distort congressional purpose to hold that a third party solvent co-defendant should be shielded against his creditors by a device intended for the protection of the insolvent debtor” and creditors thereof.

In re Cincom iOutsource, Inc., 398 B.R. at 229 (quoting Lynch, 710 F.2d at 1197). And that the Supreme Court has rejected too. Purdue Pharma L.P., 603 U.S. 204.

Ultimately, as mentioned above, the most that it appears could happen with respect to administration of this and the related chapter 7 cases as a result of the State Court Litigation proceeding against the Non-Debtors is that the claims of the HCSG Companies and DMD would shift. But proofs of claim are precisely the outcome envisioned by Congress and do not raise any concerns vis-à-vis the automatic stay. See In re Cincom iOutsource, Inc., 398 B.R. at 228 (stating “[t]he only impact that may affect the bankruptcy estate, as far as we can determine, is one that was well intended by Congress” and “Fifth Third, to its credit, has already taken advantage of it” by filing “a proof of claim in the bankruptcy case” such that a resultant judgment would not “have an effect on property of the estate that is forbidden under the Bankruptcy Code.”).

Based on the foregoing, there is no basis for the Court to conclude that any property of the Debtors’ bankruptcy estates would be impacted, outside of the claims process that will occur, if at all, in this Court, in a manner implicating § 362(a)(3). Again, the Non-Debtors have not sought an injunction under § 105(a), such that there is no basis to engage in the “unusual circumstances” test applicable under § 362(a)(1), which means that the Non-Debtors’ failure to show that any property of the estate will be impacted, or that the Trustee, who now controls the property of the estate, would be substantially burdened by any remaining discovery, leaves the Court no choice but to conclude that the automatic stay does not apply to the HCSG Companies’ claims against the Non-Debtors, which are in the nature of claims against co-obligors or guarantors.

It is difficult to see how the Debtors’ chapter 7 estates will be worse for the wear by virtue of the State Court Litigation proceeding as against the Non-Debtors. The Non-Debtors are not alleged to hold any estate property, and the cumulative amount of claims against the Debtors’ bankruptcy estates would not appear to increase overall as a result of the State Court Litigation. Instead, based on the information provided so far, the State Court Litigation would conceptually only change the relative amounts of the cumulative total owed to each of the HCSG Companies and Non-Debtors (DMD), depending on how (or whether) the claims process plays out in these chapter 7 cases.

E. This Court Does Not Have Any Role in the State Court's Management of its Docket Apart from Determining if the Automatic Stay of the Chapter 7 Cases Applies.

Although the State Court stayed the State Court Litigation, its reasons for doing so are not expressed in its State Court Order, which only states that the State Court Litigation is stayed until the conclusion of these bankruptcy cases. And although the Court is determining herein that the automatic stay does not apply to the dispute between the HCSG Companies and the Non-Debtors, the State Court could have a myriad of other non-bankruptcy reasons to stay the litigation that are not directly related to the automatic stay. And it goes without saying that this Court does not have a role in how another court chooses to manage its docket. But perhaps this Memorandum Opinion and Order will provide guidance concerning the inapplicability of the discussed automatic stay provisions under Sixth Circuit law to the HCSG Companies’ action against the Non-Debtors, such that the State Court can determine whether to maintain the stay for any other reasons.²⁹

The Non-Debtors suggest that the State Court was motivated by the argument that discovery was impractical without the participation of the Debtors, and the Debtors were protected by the automatic stay. The Debtors, however, are no longer operating and the corporate entities’ assets are being liquidated under the administration of the Trustee; thus, the participation of any individuals formerly or currently associated with the Debtors should not have much, if any, impact upon the administration of this bankruptcy case. Of course, if the Trustee determines otherwise, she would have standing to ask this Court to impose an injunction.

F. The State Court Order Did Not Expressly Address the Applicability of the Automatic Stay of this or the Related Chapter 7 Bankruptcies.

The HCSG Companies argue that the State Court Order that stayed the State Court Litigation was beyond the State Court's subject matter jurisdiction. However, as previously explained in the Jurisdiction section (III.) above, state courts maintain concurrent jurisdiction with bankruptcy courts to determine the applicability of the automatic stay. Edward Cooper Painting, 804 F.2d at 940. However, if a state court makes such a determination, it may be subject to this Court's review if it was in error. Id. But the State Court did not make any findings as to the automatic stay. It simply stayed the State Court Litigation until the conclusion of these bankruptcy cases. It may have been motivated by concerns over application of the automatic stay under the law of the Sixth Circuit or about the progress of the litigation with the Debtors in bankruptcy, or perhaps it stayed the case for some other reason. The State Court Order staying the State Court Litigation is interlocutory, and this Court is determining, based on applicable Sixth Circuit precedent, that the cited provisions of the Bankruptcy Code governing the automatic stay do not apply to insulate the Non-Debtors from the State Court Litigation. While it was not beyond the State Court's concurrent jurisdiction to address the applicability of the automatic stay, it does not appear to have actually done so. Either way, it is appropriate for this Court to provide its analysis under its concurrent jurisdiction. See supra Section III (Jurisdiction).

V. Conclusion

For the foregoing reasons, the Court determines that the automatic stay arising from the Debtors’ related chapter 7 bankruptcies, specifically the automatic stay provisions in 11 U.S.C. § 362(a)(1), (3), and (6), do not apply to the State Court Litigation by the HCSG Companies insofar as the HCSG Companies are proceeding against the Non-Debtors. It should go without saying, however, that the automatic stay does apply and that no action may be taken against the Debtors.

IT IS SO ORDERED.

Attachment A

Docket Nos. for Motion to Determine, Objection, and Reply (as referred to in the: Memorandum Opinion and Order Determining that the Automatic Stay Does Not Apply to Litigation Against Certain Non-Debtors)

Entity Name Case No. Motion to Determine, Objection & Reply Docs. 1 Legacy Beavercreek of Dayton Operating Company, LLC 25-31552 Mot. 48; Obj. 52; Reply 53 2 Legacy Miamisburg Operating Company, LLC 25-31553 Mot. 45; Obj. 49; Reply 50 3. 4. Legacy Centerville Operating Company, LLC 25-31554 Mot. 44; Obj. 48; Reply 49 Legacy Kettering Operating Company, LLC 25-31555 Mot. 43; Obj. 47; Reply 48 5 Buckeye Chai Holding Company, LLC 25-31556 Mot. 38; Obj. 40; Reply 41 6 Legacy Barberton Operating Company, LLC 25-31557 Mot. 42; Obj. 47; Reply 48 7 Legacy Bucyrus Operating Company, LLC 25-31558 Mot. 45; Obj. 49; Reply 50 8 Legacy of Chillicothe Operating Company, LLC 25-31559 Mot. 44; Obj. 46; Reply 47 9 Legacy Dublin Operating Company, LLC 25-31560 Mot. 53; Obj. 57; Reply 58 10. Legacy Hillsboro Operating Company, LLC 25-31561 Mot. 45; Obj. 47; Reply 48 11. Legacy Marietta Operating Company, LLC 25-31562 Mot. 41; Obj. 43; Reply 44 12. Legacy Marion Operating Company, LLC 25-31564 Mot. 43; Obj. 47; Reply 48 13. Legacy Mentor Operating Company, LLC 25-31565 Mot. 47; Obj. 53; Reply 54 14. Legacy North Royalton Operating Company, LLC 25-31566 Mot. 47; Obj. 49; Reply 50 15. Legacy Perrysburg Operating Company, LLC 25-31567 Mot. 46; Obj. 48; Reply 49 16. Legacy Riverview of South Point Operating Company, LLC 25-31568 Mot. 45; Obj. 47; Reply 48 17. Legacy Twinsburg Operating Company, LLC 25-31569 Mot. 42; Obj. 46; Reply 47 18. Legacy Westerville Operating Company, LLC 25-31570 Mot. 41; Obj. 45; Reply 46 19. Legacy Willoughby Operating Company, LLC 25-31571 Mot. 52; Obj. 56; Reply 57

FOOTNOTES

1.   Hereinafter, unless otherwise stated, all code sections refer to sections of title 11 of the United States Code (the “Bankruptcy Code”).

2.   The state court action was originally filed against the related debtors in these cases and the non-debtor entities.

3.   The parties have not cited any case law in which an injunction has been entered under § 105(a) in a chapter 7 liquidation.

4.   Buckeye Chai Holding Company, LLC (“Buckeye Chai”), described as the “corporate parent,” is scheduled as wholly owning all membership interests of the eighteen (18) former operating company Debtor subsidiaries. See Global Notes at 1 (Doc. 34, Case No. 25-31556); Schedule A/B—Real and Personal Prop. at 3-4, Part 4, item 15 (Doc. 34 at 9-10, Case No. 25-31556) (listing all 18 operating company Debtors as 100% owned). The majority member of Buckeye Chai is Buckeye Chai Investors, LLC, which owns a 70% interest in Buckeye Chai. Statement of Fin. Affairs at 14, Item 28 (Doc. 34 at 58).

5.   The Debtors are listed in the caption of this Memorandum Opinion and Order and in Attachment A. This Memorandum Opinion and Order is being contemporaneously entered in each of the nineteen (19) related chapter 7 cases.

6.   The document numbers referenced within this decision, unless otherwise indicated, are those in the filings of Legacy Beavercreek Dayton Operating Company, LLC, NO. 25-31552. Parallel filings exist in the related chapter 7 cases. See infra Attachment A.

7.   The Ombudsman Order was entered in all nineteen (19) related chapter 7 cases.

8.   As noted in the Ombudsman Order, the only response to the Debtors’ Motion for an Order Finding the Appointment of a Patient Care Ombudsman Unnecessary (Doc. 17) was filed by the purchaser of Debtors’ assets, PACS Holdings, LLC, to dispute certain representations therein, but “specifically stated that respondent ‘does not object to the relief sought in the Motion.’ ” Resp. of PACS Holdings, LLC (Doc. 19), filed Aug. 25, 2025.

9.   Interestingly, there was a similar motion to determine the applicability of the automatic stay to claims against Non-Debtor DMD Management, Inc. (Doc. 49) filed by creditor IntelyCare, Inc. on November 21, 2025; however, that motion was withdrawn (Doc. 60) on February 19, 2026, without prejudice, “on grounds that the relief sought ․ has been rendered moot by virtue of the Cuyahoga County Court of Common Pleas’ entry denying Non-Debtor DMD Management, Inc.’s Motion for Stay[.]” Notice of Withdrawal at 3 (Doc. 60).

10.   The ten (10) “Non-Debtor Entities,” as identified in the Motion to Determine, as well as the State Court Litigation filings, are: 1) Broadview Nursing Home, Inc.; 2) C.A.S. Health Investors Company; 3) Franklin Boulevard Nursing Home, Inc.; 4) Euclid Hill Health Investors Co.; 5) Mapleview Holding Company, LLC; 6) Oregon Health Investors Company; 7) Middleburg-Legacy Place, LLC; 8) Pleasant Lake Nursing Home, Inc.; 9) Ridge-Pleasant Valley, Inc.; and 10) 3G Operating Company, LLC (collectively, the “Non-Debtors”). (Doc. 48 at 4 n. 2.) DMD, the same entity that is the Debtors’ Liquidation Administrator, manages these nursing home facilities for the Non-Debtors. (Doc. 52 at 3.) And within both the Answer filed in the State Court Litigation (Ex. D to Motion to Determine (Doc. 48-4)) and the Objection, DMD refers to the Non-Debtors and DMD, together, as the “DMD Parties.” Obj. at 3.

11.   The Court takes judicial notice, pursuant to Federal Rule of Evidence 201(c), of the filings in these related chapter 7 cases and, as specifically mentioned elsewhere in this Memorandum Opinion and Order, of the filings in the State Court Litigation, at least as to the existence of that litigation, the parties involved in those actions, that the Non-Debtors (referring to themselves as the “DMD Defendants”) moved to stay the State Court Litigation, and that the State Court entered an order staying the State Court Litigation. See Ex. A to the Objection (as defined below) (Doc. 52-1), Br. in Supp. of Mot. for Protective Order and to Stay Proceedings, Oct. 29, 2025; Ex. B to the Objection (Doc. 52-1), Order, Nov. 5, 2025; Ex. D to the Objection (Doc. 52-1), Complaint, Dec. 18, 2024.

12.   The HCSG Companies state that “Buckeye Chai Investors, LLC, although a debtor in bankruptcy, is not among the SNF Debtors with respect to which relief is sought pursuant to the motion.” Mot. to Determine at 4, ¶ 14.

13.   See Obj. at 6, ¶ 7 (“At all relevant times, DMD provided services of substantially the same type and scope to the Debtors and the Non-Debtors.” (citing Attachment to Proof of Claim filed by DMD, attached as Ex. C to Obj.)).

14.   See Attachment A and the caption for the list of all cases.

15.   The docket numbers of the Motion to Determine, Objection, and Reply, as filed in each of the nineteen (19) related chapter 7 cases, are set forth in the chart attached to this Memorandum Opinion and Order as Attachment A.

16.   Notably, Buckeye Chai Holding Company, LLC, the Debtor in Case No. 25-31556, does not appear to be a defendant to the State Court Litigation, yet the HCSG Companies also filed the Motion to Determine in that case.

17.   Although none of the parties have said so, it is possible that the State Court is presently awaiting this Court's ruling on the Motion to Determine.

18.   The Non-Debtor Entities allege, in the Objection, that “HCSG is attempting to violate the automatic stay” and that continuation of the State Court Litigation would violate the automatic stay. Obj. at 5, ¶ 5; 14-16. But for the reasons stated herein, those allegations, based on the record currently before this Court, are not correct. If, in the future, there are any colorable claims that the stay has been violated, then the parties are free to come back to this Court for determination of that issue. Similarly, if there is any need to seek relief from the automatic stay, this Court has exclusive jurisdiction to decide that issue.

19.   See also Pavelich v. McCormick, Barstow, Sheppard, Wayte & Carruth LLP (In re Pavelich), 229 B.R. 777, 783 (B.A.P. 9th Cir. 1999) (holding that “[t]he bankruptcy court erred when it ruled that the Rooker-Feldman doctrine stripped it of jurisdiction to consider whether the state court's judgment was void ab initio and whether the discharge injunction had been violated.”)

20.   The Rooker Feldman Doctrine is confined to “cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp, 544 U.S. 280, 284 (2005). The Supreme Court made clear that the doctrine does not “stop a district court from exercising subject-matter jurisdiction simply because a party attempts to litigate in federal court a matter previously litigated in state court.” Id. at 293.

21.   As the bankruptcy court noted in Toussaint, there are several options available to a debtor who is sued in state court post-discharge by a creditor seeking to collect on a prepetition debt; namely:(1) assert the bankruptcy discharge as an affirmative defense, ‘and the court with jurisdiction over that lawsuit can determine the issue of dischargeability under § 523(a)(3)’; (2) move to reopen the bankruptcy case under Fed. R. Bankr. P. 4007(b) for the purpose of filing a complaint to determine dischargeability; or (3) remove the action from state court to bankruptcy court under Fed. R. Bankr. P. 9027 to enforce the discharge injunction of § 524(a) against the creditor.259 B.R. at 101 (citing Stucker v. Cardinal Building Materials, Inc., 153 B.R. 219, 222 (Bankr. N.D. Ill. 1993); see also In re Gardner, 194 B.R. 576 (Bankr. D.S.C. 1996)). This is similar to the ultimate analysis in In re Singleton, 230 B.R. at 539, in which the Panel determined that “[t]he Debtor chose his forum.” The present situation, however, is simply different.

22.   The State Court overseeing the State Court Litigation giving rise to the present Motion to Determine conceptually might have had (or might in the future have) other bases, separate and apart from the applicability of the automatic stay arising from these chapter 7 cases, upon which to determine to stay the State Court Litigation pending before it. And in that regard, a bankruptcy court would ordinarily not have anything to say. However, to date it appears the automatic stay was the basis for the stay imposed given that the State Court Order was issued in response to the motion by the Non-Debtor Entities to stay the State Court Litigation based on the automatic stay arising from this and the related chapter 7 cases, and the Pennsylvania State Court set the duration of the stay as being coterminous with the pendency of these bankruptcy cases such that it can be inferred that the Pennsylvania State Court stayed the State Court Litigation based upon the automatic stay of these chapter 7 cases. It is also possible that the Pennsylvania State Court might have had other concerns in mind regarding management of the State Court Litigation that do not solely concern the scope of the automatic stay with respect to any actions against the Debtors, the Debtors’ property, and the property of the bankruptcy estates in this and the related chapter 7 cases. If, however, the automatic stay was the sole basis for the stay, this Court will provide guidance.

23.   No adversary proceedings have yet been filed in this or the eighteen (18) related chapter 7 cases of the Debtors.

24.   The parties do not appear to dispute the record of the State Court Litigation but instead focus on legal arguments concerning whether the automatic stay impacts the State Court Litigation. Thus, the question before the Court is a legal one. And although the pending Motion to Determine is not seeking relief from the automatic stay, determinations concerning the automatic stay are generally summary in nature. See Jin Qing Li v. Rosen (In re Jin Qing Li), No. NC-17-1062-STaB, 2018 Bankr. LEXIS 733, at *10 (B.A.P. 9th Cir. Mar. 12, 2018) (“Motions for relief from stay are “summary proceedings[.]”). In addition, none of the parties have requested a hearing on the Motion to Determine. The default procedure in the Southern District of Ohio is to decide motions “on the memoranda without oral argument, unless otherwise provided in these Local Rules or unless a hearing is scheduled by the court.” LBR 9013-1(e). Accordingly, the Court is proceeding to decide this matter; however, in retrospect it may have behooved the HCSG Companies, as the moving parties, to submit affidavits or declarations with their Motion to Determine or request a hearing.

25.   Patton observed that although “[s]ome courts have held that the debtor's stay may be extended to non-bankrupt parties in ‘unusual circumstances[,]’ ” those were not actually “extensions of the automatic stay[;]” rather, they “were in fact injunctions issued by the bankruptcy court after hearing and the establishment of unusual need to take this action to protect the administration of the bankruptcy estate.” Patton v. Bearden, 8 F.3d 343, 349 (citing and discussing A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986); In re Kanawha Trace Dev. Partners, 87 B.R. 892 (Bankr. E.D. Va. 1988)). Accordingly, the Sixth Circuit pronounced that “[e]ven if we were to adopt the unusual circumstances test, the bankruptcy court would first need to extend the automatic stay under its equity jurisdiction pursuant to 11 U.S.C. § 105.” Id.

26.   As stated in the Motion for an Order Finding the Appointment of a Patient Care Ombudsman Unnecessary (Doc. 17, Case No. 25-31552), filed by the Debtors at the outset of this case on August 19, 2025, Debtors “operations and patients were transferred to a new operator in late 2024.” Id. at 1. Said motion further stated that “[t]he transactions contemplated by the Transfer Agreement became effective on December 1, 2024, and all of Debtor's assets (with the exception of certain excluded assets such as receivables) and all existing operations were transferred to Dayton SNF Healthcare, LLC, an unaffiliated third party․ As a result of those transactions, the operations of the Debtor and its affiliates ceased entirely but for the ongoing collection of receivables and defense of ongoing litigation.”). Id. at 3, ¶ 8.

27.   Neither party has cited to an opinion issued in a chapter 7 case in which the unusual circumstances of either A.H. Robins, 788 F.2d 994 or Lynch, 710 F.2d 1194, both chapter 11 cases in which stays were imposed pursuant to 11 U.S.C. §§ 105(a) and 362(a)(3), were found to be applicable in a liquidation case.

28.   DMD Management, Inc. did file proofs of claim, such as Claim No. 17-1 filed on October 14, 2025, in the lead chapter 7 case of Legacy Beavercreek of Dayton Operating Company, LLC; however, because DMD is not a party to the State Court Litigation – it is not one of the “Non-Debtors” and it is unclear whether DMD would assert a dollar-for-dollar increase in its claim against the Debtors for amounts paid by the Non-Debtors.

29.   The HCSG Companies indicate that they have moved for reconsideration of the State Court order staying the State Court Litigation. (Doc. 53 at 19 n. 11.)

Tyson A. Crist United States Bankruptcy Judge